The Tribunal stated that China's claims to historic rights under nine-dash-line are contrary to U.N. convention. Hague also finds that Chinese actions have aggravated Philippines dispute during resolution attempts.

"China had violated the Philippines' sovereign rights in its exclusive economic zone by interfering with Philippine fishing and petroleum exploration, by constructing artificial islands and failing to prevent Chinese fishermen from fishing in the zone," the Hague-based Permanent Court of Arbitration said in a statement.

The Philippines "welcomes" South China Sea (Vietnam's East Sea) ruling, calling for "restraint and sobriety".

Philippine Foreign Secretary Perfecto Yasay gives a brief statement regarding the issuance of the award by the arbitral tribunal constituted by the United Nations Convention on the Law of the Sea (UNCLOS) during a press conference at the Department of Foreign Affairs headquarters, Manila, Philippines July 12, 2016. Photo by Reuters/Romeo Ranoco

In the 497-page ruling, judges also found that Chinese law enforcement patrols had risked colliding with Philippine fishing vessels in parts of the sea and caused irreparable damage to coral reefs with construction work.

The Chinese state media Xinhua said China "does not accept and does not recognize" Hague tribunal judgement.

China foreign minister says the ruling will worsen the tensions. President Xi Jinping said China is dedicated to maintaining peace and stability in the South China Sea but will not accept any positions or actions based on the outcome of the arbitration case over the dispute.

Philippines Foreign Minister said experts have studied award with care in response to Chinese Xinhua's claim that court has issued "ill-founded award" on the disputed waters.

Foreign Minister Fumio Kishida said in a statement that Japan has consistently advocated the importance of the rule of law and the use of peaceful means, not the use of force or coercion, in seeking settlement of maritime disputes. He also stated that the Hague tribunal ruling on the South China Sea was final and legally binding, and the parties to the case were required to comply.

A five-member tribunal of maritime affairs experts in The Hague has issued the ruling.

The tribunal set up by the Permanent Court of Arbitration is allowed to arbitrate on matters of international law, including the United Nations Convention on the Law of the Sea (UNCLOS). It has the power to make a decision that cannot be appealed. However the tribunal and the PCA have no means to enforce the verdict, with compliance left to the parties concerned.

China claims most of the South China Sea, even waters approaching neighboring countries, based on a vaguely defined "nine-dash-line" found on a 1940s Chinese map. The Philippines, and other countries, dispute this claim.

Commentators say the 3 million square kilometres (1.2 million square miles) of water are a potential flashpoint for regional conflict.

The tensions have alarmed the United States which has key defense treaties with many regional allies, and in a show of strength last week sent warships to patrol close to some of the reefs and islands claimed by China.

Meanwhile, the Chinese navy conducted combat drills near its southern island province of Hainan and the Paracel islands in the South China Sea one week ahead of the Hague tribunal's ruling.

Scientists believe that the disputed waters could contain unexploited oil, gas and minerals, which would be a boon to any country that can establish their claims to the region's waters, especially in resource-hungry Asia. It's also home to abundant fisheries that feed growing populations.